The central bank voted 9-1 to keep the federal funds rate - at which banks charge each other for loans - at an unprecedented zero to 0.25 per cent range.
It said it expected to hold the "exceptionally low" rate "for an extended period", reiterating its guidance since it slashed rates to record lows in December 2008 to jolt the world's largest economy out of its worst recession in decades.
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But it also offered a more upbeat view of the economy, saying activity is strengthening and the job market is stabilising - despite unemployment hovering at nearly 10 per cent.
"Economic activity has continued to strengthen and that the labour market is stabilising," it said - a more upbeat description than that used after its last policy meeting in January that
"the deterioration in the labour market is abating".
The statement also noted that consumer spending was constrained by "high unemployment", rather than the previous "weak labour market", which some analysts said shifts the focus away from job growth to the unemployment level, hovering at nearly 10 per cent.
Pace of recovery 'moderate'
After not mentioning housing, the epicentre of the financial crisis that plunged the US economy into recession, in the last statement, the Fed said new housing projects "have been flat at a depressed level".
"Despite noting some improvement in labour market data, the Committee gave no indication that it would proceed with the next phase of the exit strategy soon,"said analyst Dean Maki of
Barclays Capital Research.
"Rather, it maintained flexibility by saying it would use its policy tools as needed to promote economic recovery and price stability.
"The next key event is likely to occur when the Fed alters its 'extended period' language in favour of something less committal; we think this change is likely to be made in the second quarter, and it may occur as soon as the April meeting if labour market data strengthen notably, as we expect," he said.
The Fed also stressed that the pace of economic recovery was likely to be "moderate" for some time to come.
It said American households remained reluctant to spend amid high unemployment, modest income growth, lower housing wealth, and tight credit.
Multi-billion dollar stimulus
Employers also remained reluctant to add to payrolls and bank lending continued to contract, the Fed reported.
US authorities have pumped hundreds of billions of dollars into the world's largest economy to jolt it from a deep recession since December 2007.
The economy started growing from the second half of last year - at 2.2 per cent in the third quarter and 5.9 per cent in the final quarter of 2009.
Many believe the Fed will need to raise rates gradually to keep inflation in check.
The Fed policy makers also confirmed on Tuesday that the central bank will complete purchases of $US1.25 trillion ($A1.37 trillion) of mortgage-backed securities by the end of this month.
The program has been widely credited with pumping up the housing market, which was at the epicentre of the financial crisis triggered by a mortgage meltdown.
